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Oftel squeeze 70p per line DataStream price cut from BT - updated
Wednesday 07 May 2003 22:52:00 by Andrew Ferguson

Oftel has rushed through a statement on the recent BT Wholesale IPStream product range price cuts. The investigation prompted by complaints from various parties has resulted in BT suggesting a £0.70 price cut per BT Datastream line. One assumes this is per month and refers to the basic BT DataStream port price of £101/year (£8.42 per month). Hopefully when BT release details of the price cut things will become clearer.

In the grand scheme of things, when Datastream connections targetted at home users are selling at around £30 to £50 per month, the price cut seems almost a joke. The vast majority of the cost for a DataStream line is the virtual paths that are used in the backhaul from the exchange and must be rented from BT Wholesale. It would appear likely that it was this backhaul cost that the parties who filed the complaint hoped to get cut.

If the price cut does refer to the backhaul costs also, then the cut is nothing short of a scandal, particularly as Oftel say the cut is in line with what they would have recommended. Of course BT are offering discount packages, which for service providers with a £2,000,000 to £7,999,999 annual spend with BT Wholesale is worth 1%, which compared to the costs of keeping that many customers running is a minor amount.

THUS plc has responded to Oftels press release, and had the following to say "The price cuts announced by BT today appear to be the minimum required to prevent the immediate imposition of a provisional order by OFTEL. OFTEL are currently conducting a detailed investigation into DataStream pricing after complaints by THUS and other operators. We do not the believe the price cuts go far enough but we welcome OFTEL's rapid intervention into what we see as yet another abuse by BT of their market dominance. We look forward to further changes to the DataStream product, including additional price cuts, upon the completion of OFTEL's investigation."

The BT Datastream market is at a critical point, and for a few short weeks appearred to offer consumers 2Mbps connections at reasonable prices. The recent BT price cuts may now force service providers to re-think and rely on the simpler to provision 20:1 services, which are marginally more expensive. The problem is the consumer market is very sensitive to the price of products and anything above the cost of the 1Mbps and 2Mbps cable modem services will be perceived as too expensive. If Oftel does not act within the next few weeks, then BT will have managed to snuff out another part of the competition.

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